US oil firms see biggest strike since 1980

The United Steelworkers union that represents employees at more than 200 US oil refineries, terminals, pipelines and chemical plants began a strike at nine sites in the biggest walkout since 1980.

The USW started the work stoppage after failing to agree on a labor contract that expired on Sunday, saying in a statement that it "had no choice". The union rejected five contract offers made by Royal Dutch Shell Plc on behalf of oil companies including Exxon Mobil Corp and Chevron Corp since negotiations began on Jan 21.

The steelworkers' union hasn't called a strike nationally since 1980, when a stoppage lasted three months. A full walkout of USW workers would threaten to disrupt as much as 64 percent of US fuel production. Shell and union representatives began negotiations amid the biggest collapse in oil prices since 2008.

"If the strike escalates, that would be detrimental to the oil price," said David Lennox, a resource analyst at Fat Prophets in Sydney. "It will put high US production out on the market and there is nowhere for it to go."

Union goals

The refineries on strike can produce 1.82 million barrels of fuel a day, about 10 percent of total US capacity, data compiled by Bloomberg show. They span the United States, from Tesoro Corp's plants in Martinez, California; Carson, California; and Anacortes, Washington, to Marathon Petroleum Corp's Catlettsburg complex in Kentucky to three sites in Texas, according to the USW's statement.

In Texas, Shell's Deer Park complex, Marathon's Galveston Bay plant and LyondellBasell Industries NV's Houston facility are affected, according to the union. LyondellBasell activated its work continuation plan, according to spokesman George Smalley on Sunday.

Tesoro will shut down remaining process units at its Martinez, California, refinery in the next 24 hours, said a company spokeswoman. The 166,000 barrel-a-day refinery already had about half its processing capacity offline for planned maintenance, according to Singleton.

More refineries are standing by to join the sites on strike, according to two people familiar with the plan who asked not to be identified because the information isn't public.

Pay increases

Shell remained "committed to resolving our differences with USW at the negotiating table and hope to resume negotiations as early as possible", Ray Fisher, a spokesman for The Hague, the Netherlands-based company, said on Saturday.

The USW asked employers for "substantial" pay increases, stronger rules to prevent fatigue and measures to keep union workers rather than contract employees on the job, Gary Beevers, the USW international vice-president who manages the union's oil sector, said in October.

"The problem is that oil companies are too greedy to make a positive change in the workplace," USW International Vice-President Tom Conway said in Sunday's statement. "They continue to value production and profit over health and safety, workers and the community."

A spokesman for Marathon confirmed work stoppages at its Catlettsburg refinery and Galveston Bay plant. Marathon has "plans in place to ensure the continued safe operation of its facilities and stands ready to continue negotiations at the local level", a Marathon spokesman said.

The walkout also includes Marathon's Houston Green cogeneration plant in Texas and Shell's Deer Park chemical plant.

Tesoro received a strike notification from its Mandan, North Dakota, refinery, in addition to plants in Martinez, California, Carson, California and Anacortes, Washington, said Singleton on Sunday.

A notice allows workers to prepare for a walkout and doesn't necessarily mean a strike will occur, according to the union. The remaining USW-represented sites are operating under rolling, 24-hour contract extensions, the USW said.

Knee-jerk reaction

"There will be a knee-jerk reaction in gasoline and diesel prices because we don't know how long this is going to be or how extended it might be," said Carl Larry, Houston-based director of oil and gas at Frost & Sullivan. "It'll be bearish for crude, but we've already accounted for a lot of the fact that refineries are in maintenance."

The local USW at BP Plc's 405,000 barrel-a-day Whiting refinery in Indiana has agreed to a rolling 24-hour extension, said a spokesman for the London-based company. All BP facilities with USW-represented workforces are now operating under rolling 24-hour extensions, according to Dean.

Shell activated a contingency plan to continue operations at the Deer Park refinery, Fisher said on Saturday.

A derrick hand on an oil rig in Knox County, Ohio. The United Steelworkers union strike affecting oil refineries, terminals, pipelines and chemical plants could disrupt as much as 64 percent of US fuel production. TY Wright / Bloomberg